1. “An economy’s competitiveness cannot be reduced only to GDP and
productivity because enterprises must also cope with political,
social and cultural dimensions. Therefore nations (and regions)
need to provide an environment that has the most efficient
structure, institutions and policies that encourage the
competitiveness of enterprises”
- IMD World Competitiveness Yearbook 2012

2. Measuring the business and investment climate
• The business climate and the investment climate are
well-established concepts in macroeconomics
• They usually refer to national rather than local and
regional dimensions
• Increasingly, they are being applied to city and
regional levels

3. The role of business and investment climate
performance indicators
• Promote learning and orientate
stakeholders toward results
• Provide information to enhance
decision-making
– For business to determine and
validate investment plans and to
assess locations for new operations
– For government to benchmark
policies
– Analysts evaluate how nations (and
regions) and enterprises compete
on world markets
• Promote participation, capacity
development and good
management practices
• Improve transparency and
enhance accountability

4. Example: Factors that determine the quality of a business
climate - International Economic Development Council, 2011
Business tax Workforce
Energy costs
levels availability
Quality of
Market size Cost of living
services
Environmental Permitting &
Quality of life
regulation licensing
Access to
Real estate costs
Infrastructure financing, capital
and availability
& incentives

5. Example: World Bank Ease of Doing Business
Index, 2011
Enforcing Protecting Starting a
contracts investors Business
Dealing with
Trading across
construction Getting credit
borders
permits
Registering Closing a
Paying taxes
property business

6. Example: 12 Pillars of Competitiveness
– World Economic Forum 2011/12 Global Competitiveness Report

7. South Africa competitiveness ranking 50/142
– World Economic Forum 2011/12 Global Competitiveness Report
Strengths Weaknesses
• Market size (25th) • Labour market efficiency (95th)
• Rigidity of employment practices
• Quality of institutions (139th)
• Property protection (30th) • Lack of flexibility in wage
determination by companies
• Property rights (30th) (138th)
• Significant tensions in labour-
• Accountability of private employee relations (138th)
institutions (3rd) • University enrollment (97th)
• Infrastructure upgrading (62nd)
• Goods market efficiency • Business costs of crime and
(32nd) violence (136th)
• Police unable to provide
protection from crime (95th)
• Health of workforce (129th)

8. Ranking the ability of nations to create and maintain an environment
in which enterprises can compete
Example: World Competitiveness Yearbook 2012 – IMD World Competitiveness
Centre, Four competitiveness factors, 20 sub factors, 329 ranking criteria

9. South Africa competitiveness ranking 50/59
- IMD World Competitiveness Centre
Strengths Weaknesses
• Fiscal policy (8th) • Unemployment rate 25%
• Prices (7th) (59th)
• Effective legal environment • Labour market (56th)
• Quality of corporate • Basic infrastructure (55th)
governance • Education (50th)
• Dynamism of the economy • State competency
• Open and positive attitudes • Research and development
• Skills of workforce

10. Example: Creation of conditions in which SMEs
can thrive – OECD Istanbul Declaration, 2011
Stable Enabling
Laws & systems
macroeconomic regulatory
of governance
policies frameworks
SME assistance & Reduced barriers
Human resource
development to SME access to
policies
programmes global markets
Access to
financing of
SMEs

11. Example: Specific focus on human capital
People Risk Index – AON Consulting, 2010

12. Example: Vietnam Provincial Competitiveness
Index – DAI and The Asia Foundation, 2011
Land access Transparency
Entry Costs and security of and access to
tenure information
Time costs of Proactivity of
Informal
regulatory provincial &
charges
compliance local leadership
Business
Labour and Legal
support
training institutions
services

13. Example: The characteristics of business-friendly
cities and regions – Greg Clark, 2011
Local & regional Local & regional
Delivery of business
business climate business climate
services
(product) (image)
• Economic potential • Business & • Networking and
• Cost effectiveness investment climate capacity building
• Commercial promotion • Inward investment
incentives & • Existence of facilitation
regulatory promotion
effectiveness strategy
• Quality of life • Number of staff
• Human resources & programmes
• Infrastructure • Number of global
events

14. Multiple dimensions of business and investment
climate success – Greg Clark, 2011
Scale specific
• B&IC success is determined by processes that are international, national
and sub-national
Sector specific
• For example, export businesses will have different needs to SMEs in
services sector
Business type specific
• Needs of MNCs, SMEs, entrepreneurs and informal sector differ
More than regulation and legal frameworks
• Connectivity, quality of life, cost, human capital, markets, environment
More than FDI attraction
• Establishment, growth and retention of existing businesses as important

15. Conclusions
• Economic governance matters!
• Measuring the regional business & investor climate, and
acting to continually improve it, requires an inter-
governmental, transversal and cross-sector partnership
approach
• There is no optimal design for a performance indicator
system – we must set clear regional objectives before we
determine factors and criteria to be measured
• There is a need to differentiate those factors which fall
within the ambit of sub-national government and those
which are part of national government

16. Initial inputs to Cape 2040 Index
•Technical and
Educated •Numeracy and Tertiary education •No of patents
Cape literacy enrolment
• Time and costs of
Enterprising regulatory compliance • Innovation
• Employment levels
Cape starting a business
• Basic connectivity • Technological
Connecting • Networks and
infrastructure – infrastructure &
Cape collaborative capacity transport & broadband readiness
Living Cape •Basic infrastructure • Health and safety • Quality of life
• Energy stability and • Water security and • Carbon footprint
Green Cape cost cost
Leading • Proactivity of local •Transparency and •Institutional
change and provincial leadership access to information maturity

17. Next steps
• Workshop in July to be hosted by Western Cape
Government Red Tape Reduction Unit (under
auspices of Economic and Infrastructure Steering
Group)
• EDP Business and Investment Climate working group
to be established

18. How do we improve the
performance of the regional What is the shared vision?
economic development Vision and What are the key transitions?
system? strategy How do we navigate these
How do we assist transitions successfully?
organisations to deliver
better on their own
mandates?
Leadership is required
to open spaces for
Regional experimentation and
economic innovation, identify Data and
delivery system trade-offs, make the intelligence
performance tough choices, and to
persuade and inspire
What do we currently
measure?
What data is available?
Why do we measure? Business & Who is doing the measuring?
What should we measure? investment Do we agree on the data?
How should we rank climate How do we apply the data?
performance?